Q3 2018 Financial Results

Apple announced financial results for Q3 2018 on 31 July 2018.

The third quarter is traditionally its slowest quarter, but Apple posted revenue of $53.265 billion for it’s fiscal third quarter of 2018, up 17 percent year-on-year, and exceeding analyst forecasts for revenue of $52.37 billion, and it’s own forecast of revenue between $51.5 billion and $53.5 billion

In the same quarter last year Apple posted $45.408 billion revenue.

This news came as tech stocks from the likes of Facebook and Netflix were seeing losses and missing analyst targets, sparking fears of a tech market bust. In comparison, Apple is nearing a $1 trillion market cap, and is likely to become the first public company to hit this figure. Apple will hit the trillion mark when its stock passes $203.50 - it closed at $190.29 on 31 July.

Reporting its results for the quarter that ended on 30 June 2018, Apple said net income was $11.52 billion, a 32% increase on last year’s third quarter. This translates to $2.34 per share - which beat the $2.17 per share expected by analysts.

iPhone sales

Apple reported that 41.3 million Phone’s were sold in the quarter. While this was below analyst estimates of 41.79m those sales bought in revenue of $29.906bn, which is a 20% increase in revenue year-on-year.

It’s that increase in revenue that’s important as it is related to the higher selling price of the iPhone. It shows that Apple is making more money from the sale of each iPhone, with the average price of an iPhone dropping only slightly compared to last quarter, from around $728 to about $724, and is up year-on-year compared to the average of $606 a year ago.

To put this in perspective, fewer iPhones are being sold compared to when the iPhone 6 launched, but the average selling price of an iPhone is up.

The figures suggest that the iPhone X is more popular than the iPhone 8 and 8 Plus, and Apple confirmed that it still is Apple’s top-selling product.

As for whether the smartphone market is contracting, with concerns that Apple is too reliant on iPhone sales, and there will be less capacity to make money in the future, Apple’s CEO Tim Cook isn’t worried. During the conference call with analysts he explained that the smartphone market is a good market to be in just because it is so big. “Whether it grows 1-2 percent, 5 percent, 10 percent, or shrinks, it’s still a huge market,” he said.

iPad sales

Apple sold 11.553 million iPads in the quarter, which is a little more than they sold in the year-ago quarter, but iPad revenue was down 5 percent year-on-year, at $4.741bn, indicating that the average selling price of an iPad dipped. Of course, this isn’t surprising given that the more expensive iPad Pro models haven’t been updated since June 2017, while the cheaper iPad is relatively new.

Mac sales

Mac sales were down 13% year-on-year at 3.720 million, bringing in $5.330bn in revenue, down 5% on the year-ago quarter.

This isn’t really surprising given that in the same quarter of 2017 Apple had released new MacBook Pro, iMac and MacBook models in early June, while in 2018 the company barely managed to release new MacBook Pros before the end of the quarter.

This point was touched on by Apple CFO Luca Maestri in the call with analysts, who pointed out that Apple released new Macs at a different time in 2017, which might have slightly affected sales for the quarter.

As for the future of the Mac, during the conference call, Cook did briefly speak about Marzipan, the project to make it easier for iOS developers to bring their apps to the Mac.

Along with the potential to make the Mac a more attractive platform, this project should help Apple make more money from the Mac App Store, which is something we will touch on in the Services section.

Other Products sales

Apple doesn’t break out its sales of things like the Apple Watch, HomePod and AirPods, instead it clumps them together under the banner of Other Products.

This Other Products segment grew 36.5% compared to the same period in 2017, bringing in revenue of $3.740 billion.

While Apple didn’t release data on how many Watches were sold, it did reveal that there was growth in the “mid-40% range” in the quarter. The company also indicated that AirPod growth “resembles early days of the iPod,” on the basis that the wireless ear-buds are “becoming increasingly visible in public.”

Luca Maestri added that Apple has been selling AirPods as quickly as the company can make them.

Regarding, HomePod, Apple didn’t talk figures but it did mention that its smart speaker is now available in more countries.


The services section of Apple’s business is becoming more and more important to Apple. The consensus among Apple watchers is that as the smartphone market shrinks it becomes more important for Apple to make money out of the market it has acquired via the iPhone and its other products. Apple is hoping to double services revenue by 2020, and it appears to be on track to do so.

In the third quarter of 2018 services revenue - that’s sales of apps, music, games, AppleCare, Apple Pay fees and the like - was up 31% year-on-year at $9.548 billion. That’s more than the iPad or Mac made, as has been the case for some time.

While it didn’t go into specifics, Apple reported that Apple Music subscriptions had grown 50% year-on-year and in the quarter there were over a billion Apple Pay transactions. Apple’s Tim Cook also revealed that the App Store took twice the revenue of Google Play.

There’s something big in the pipeline too that could see the services revenue increase in 2019. Apple CEO Tim Cook hinted at Apple’s TV ambitions, saying: ”We hired two highly respected television executives last year, and they have been here now for several months and have been working on a project that we're not really ready to share ... all the details about it yet. But I couldn't be [more] excited about what's going on there”.

Apple’s been talking up its plans to take on TV for years now and it looks like the work it’s been doing in the area will soon become public, as it starts to broadcast its own content. You can read all about Apple’s plans for a streaming service to take on Netflix and Amazon here.


China was up 19 percent year over year, versus 16 percent for the rest of the Asia-Pacific region, 14 percent for Europe, and 20 percent in the Americas. Each region generated the following revenue: Americas $24.542bn, up 20%, Europe $12.138bn, up 14%, Greater China 9.551bn up 19%, Japan $3.867bn up 7%, Asia Pacific $3.167bn up 16%.

Speaking of China, there is a bit of a trade war going on between China and the USA that Cook touched on briefly. Namely the effect that tariffs impose on goods imported from China will have on Apple’s products that are often manufactured in the country (although the design part happens in the US). The Apple Watch could be hit by the latest round of tariffs - likely to face an 10% import tariff.

Cook made his feelings clear about this, pointing out that tariffs are usually translated into a higher price for the consumer, which he says is damaging to the economy.

Next quarter

The company is predicting 16-19% growth for the next quarter and expects revenue of $60 billion to $62 billion.

Apple issued the following guidance for its fiscal 2018 fourth quarter:

  • revenue between $60 billion and $62 billion
  • gross margin between 38 percent and 38.5 percent
    operating expenses between $7.95 billion and $8.05 billion
  • other income/(expense) of $300 million
  • tax rate of approximately 15 percent before discrete items